专业课资料 练习题 真题 曼昆宏观经济学英文版讲义 Ecn101_lecture21

1 0 Econ 101 Intermediate Macro Theory Lecture notes Professor Cetorelli UC Davis Fall 2003 Lecture 21 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 1 From last time CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 2 The national income identity The national income identity in an open economyin an open economy Y Y C C I I G G NXNX or NX Y C I G net exports domestic spending output CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 3 In a small open economy In a small open economy r S I I r S r r I1 the exogenous world interest rate determines investment and the difference between saving and investment determines net capital outflows and net exports NX r 2 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 4 The nominal exchange rateThe nominal exchange rate e nominal exchange rate the relative price of domestic currency in terms of foreign currency e g Yen per Dollar How many units of foreign currency are needed to purchase to exchange with one unit of domestic currency CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 5 The real exchange rateThe real exchange rate real exchange rate the relative price of domestic goods in terms of foreign goods e g Japanese Big Macs per U S Big Mac eP P CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 6 Interpretation of Interpretation of The real exchange rate tells us how expensive domestic goods are relatively to foreign goods If is high it means that domestic goods are expensive and foreign goods are cheap it is all in relative terms If is low it means that domestic goods are cheap and foreign goods are expensive CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 7 How How NXNXdepends on depends on either because Pgoes up or egoes up or P goes down either way U S goods become more expensive relative to foreign goods EX IM NX eP P 3 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 8 The The NXNX curve for the U S curve for the U S 0NX NX 1 When is relatively low U S goods are relatively inexpensive NX 1 so U S net exports will be high CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 9 The The NXNX curve for the U S curve for the U S 0NX NX 2 At high enough values of U S goods become so expensive that NX 2 we export less than we import CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 10 How How is determinedis determined Neither Snor I depend on so the net capital outflow curve is vertical NX NX 1 SI r adjusts to equate NX with net capital outflow S I 1 NX1 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 11 Interpretation supply and demand in Interpretation supply and demand in the foreign exchange marketthe foreign exchange market demand Foreigners need dollars to buy U S net exports NX NX 1 SI r supply The net capital outflow S I is the supply of dollars to be invested abroad 1 NX1 4 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 12 Four experimentsFour experiments 1 Fiscal policy at home 2 Fiscal policy abroad 3 An increase in investment demand 4 Trade policy to restrict imports CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 13 1 1 Fiscal policy at homeFiscal policy at home A fiscal expansion reduces national saving net capital outflows and the supply of dollars in the foreign exchange market causing the real exchange rate to rise NX NX 1 SI r 1 NX1NX2 2 SI r 2 which makes domestic goods more expensive and foreign goods cheaper Hence NX fall CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 14 2 2 Fiscal policy abroadFiscal policy abroad An increase in r reduces investment increasing net capital outflows and the supply of dollars in the foreign exchange market causing the real exchange rate to fall and NXto rise NX NX 11 SI r NX1 1 21 SI r 2 NX2 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 15 3 3 An increase in investment demandAn increase in investment demand An increase in investment reduces net capital outflows and the supply of dollars in the foreign exchange market NX NX causing the real exchange rate to rise and NXto fall 1 11 SI NX1 21 SI NX2 2 5 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 16 4 4 Trade policy to restrict importsTrade policy to restrict imports NX NX 1 SI NX1 1 NX 2 At any given value of an import quota IM NX demand for dollars shifts right Trade policy doesn t affect Sor I so capital flows and the supply of dollars remains fixed 2 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 17 4 4 Trade policy to restrict importsTrade policy to restrict imports NX NX 1 SI NX1 1 NX 2 Results 0 demand increase NX 0 supply fixed IM 0 policy EX 0 rise in 2 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 18 Effects of trade restrictionsEffects of trade restrictions Possibly important and unwanted redistributional effects other domestic sectors are hurt because of lessened demand from abroad Also if goods under trade retrictions are important inputs of production for other domestically produced goods then negative impact of trade restrictions could be amplified Example U S steel tariffs Steel imports went down but steel price went up This jeopardized activity of US industries using steel as an input There are 190 000 workers in the US steel sector There are about 9 Million workers in US sectors using steel CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 19 News just from yesterday Curtailing Medicines From Canada Japan and E U Threaten U S on Import Sanctions 6 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 20 The Determinants of the The Determinants of the Nominal Exchange RateNominal Exchange Rate Start with the expression for the real exchange rate eP P Solve it for the nominal exchange rate P e P CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 21 The Determinants of the The Determinants of the Nominal Exchange RateNominal Exchange Rate M L rY P NX SI r So edepends on the real exchange rate and the price levels at home and abroad and we know how each of them is determined P e P M L rY P CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 22 The Determinants of the The Determinants of the Nominal Exchange RateNominal Exchange Rate We can rewrite this equation in terms of growth rates see arithmetic tricks for working with percentage changes Chap 2 P e P e PP e PP For a given value of the growth rate of eequals the difference between foreign and domestic inflation rates CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 23 Inflation and nominal exchange ratesInflation and nominal exchange rates Percentage change in nominal exchange rate 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 Inflation differential Depreciation relative to U S dollar Appreciation relative to U S dollar 1 2 3102345687 France Canada Sweden Australia UK Ireland Spain South Africa Italy New Zealand Netherlands Germany Japan Belgium Switzerland 7 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 24 Purchasing Power Parity PPP Purchasing Power Parity PPP a doctrine that states that goods must sell at the same currency adjusted price in all countries Reasoning arbitrage the law of one price CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 25 Purchasing Power Parity PPP Purchasing Power Parity PPP PPP e P P Cost of a basket of domestic goods in foreign currency Cost of a basket of domestic goods in domestic currency Cost of a basket of foreign goods in foreign currency Solve for e e P P PPP implies that the nominal exchange rate between two countries equals the ratio of the countries price levels CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 26 Purchasing Power Parity PPP Purchasing Power Parity PPP If e P P then 1 PPP e PPP and the NX curve is horizontal NX NX 1 S I Under PPP changes in S I have no impact on or e CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 27 The Economist April 24 2003 Price in Yen262 96 7 Price in 2 71 This should be e if PPP held true The Yen is undervalued 96 7 120 10019 120 8 CHAPTER 5CHAPTER 5The Open EconomyThe Open Economy slide 28 Does PPP hold in the real world Does PPP hold in the real world No for two reasons 1 International arbitrage not possible nontraded goods transportation costs 2 Goods of different countries not perfect substitutes Nonetheless PPP is a useful theory We can at least say that exchange rates have a tendency toward their PPP values over the long run